Real Property Notes Blog
Title Company Not Liable for Blocked Alley
In Shower Curtain Solutions Limited LLC v First American Title Inc. Co., an unpublished Michigan Court of Appeals opinion, the plaintiff purchased property separated by an alley that had been vacated from that owned by another defendant. The other defendant has fenced off the entire alleyway. After purchase, the plaintiff first obtained an easement for use of the alley, then filed suit seeking a judgment quieting title, and for negligence and breach of contract against both First American Title and its agent, Seaver Title Agency. Plaintiff was granted a judgment quieting title, which was not appealed. Claims against both First American and Seaver were dismissed. Plaintiff appealed, and Seaver cross-appealed the trial court’s denial of its request for sanctions for a frivolous lawsuit. The appeals court affirmed dismissal of plaintiff’s claims, but reversed and remanded the denial of the request for sanctions.
First, the court held that a title insurance company is not liable for a tort claim; a title insurance company’s liability is limited to the terms of the contract.
Second, the court held that Seaver as an action on behalf of a disclosed principal, First American, and could not be held liable.
Third, the court found that the property insured under the policy did not include the alley, and thus First American could not be held liable for breach of contract.
Finally, the court held that plaintiff’s claims against Seaver were frivolous, because the case law was clear that Seaver asn an agent was not liable, and plaintiff had made no argument for a reversal of existing law. The case was remanded back to the lower court for determination of sanctions.
Another Decision Interpreting a “Judicial Claims and Actions” Provision
Goodson v Cairns, an unpublished Michigan Court of Appeals opinion, reviewed protracted litigation in the Macomb County Circuit Court regarding many issues, including receiverships, derivative actions under the Michigan Nonprofit Corporation Act, interpretation of the condominium documents, and the validity of elections and assessments. As relevant to this blog, the court addressed whether two provisions of the condominium documents prohibited a condominium association from defending itself in litigation.
Article II Section 2d of the condominium bylaws provided that the board had no authority to levy an assessment or to incur any legal expenses or attorney fees other than an action to collect assessments or enforce the bylaws, except as specifically authorized under Article XXIII of the condominium bylaws. Article XXIII contained provisions similar to that enforced in Tuscany Grove v Gasperoni, providing that the (rather onerous) requirements apply to “the Association’s commencement of any civil action other than an action to enforce these Bylaws or to collect delinquent assessments.” The plaintiff contended that these two provisions read together prohibited the association from assessing members to pay for defense of his case, or from hiring an attorney.
The trial court clearly struggled with this issue, issuing three orders (two on motions for reconsideration). Ultimately, the trial court held that reading these provisions in such a way as to prohibit the association from defending itself raised due process issues.
The court of appeals noted that, while Article XXIII required compliance before commencement of litigation, notably it did not require compliance before defending litigation started against the association. The court also held that the association’s right to due process would be implicated if it were prohibited from defending itself.
These “Judicial Claims and Actions” provisions are popular among developers, because of the belief that it discourages litigation over construction defects and other claims. Most of these provisions, like the one in this case, apply to the commencement of litigation and not to defense. However, the author has encountered one set of condominium bylaws which purports to require co-owner approval even for defense of an action filed against the association. Should that association ever be sued, this case lends support that such a prohibition would be a violation of the association’s right to due process.
MCL 559.195 Used to Reform Percentages of Value
In Beckman Holdings, Inc. v Sunnyside Resort Condominium Association, an unpublished Michigan Court of Appeals opinion, the owner of two vacant lot units in a condominium sued the association to revise the percentages of value as stated in the Master Deed, claiming that there had been a change in the condominium subdivision plan such that the stated percentages of value were no longer equitable. Eight units contained cottages, one unit contained a home with a heated garage, and one unit had a home with a five-tier deck. The two vacant units had no structures. Additionally, several of the board members had constructed garages on the general common elements.
The trial court found that there had been a change in the condominium subdivision plan and ordered the percentages of value revised. The association appealed.
The association argued that a revised subdivision plan must be recorded before an action under MCL 559.195 could arise. The court held that there was no such requirement in the statute and the court would not read such a requirement into the statute. The trial court properly found that the developer’s original plan for the project had changed since the original master deed was recorded, and it was necessary to adjust the percentages of value as a result.